Bootstrapping an Oracle Consultancy

I've not been blogging much recently because I've been working flat out on something that's turned out equally as interesting - bootstrapping a consulting business with an old colleague of mine, Jon Mead. When I used to bump in to people such as Mogens Norgaard and Jonathan Lewis at user group events, one of the questions I always used to ask them was what was involved in setting up a company, going freelance and the like, and now I've done it, I thought others might be interested in how it's gone.

I mentioned a couple of months ago that I was going freelance, and you may or may not know that prior to that, for the past seven years or so I worked as a consulting manager at an Oracle partner in the UK. I've always wanted to set up my own consultancy - the model being a bit of Miracle, mixed up with Joel Spolsky's approach to handling developers and Eric Sink's approach to marketing - but I'm pretty risk-averse and a developer/consultant rather than a salesperson. So any company we set up had to have low start-up costs, a pretty safe business model and also give us a reasonable amount of time for R&D/geeking as well as actual billing work.

When you go freelance, there's basically two models you can follow. You can either become a contractor, get your work off Jobserve (in the UK), work for the same client for months if not years, and make a lot of money at least in the short to medium term. The problem with contracting is that it's pretty soulless sometimes (you're effectively a mercenary, a "gun for hire" so to speak), the temptation to work all the time means you don't get the chance to do training or try out new technologies, and the tax situation is getting stricter, at least in the UK with IR35 and the new umbrella company rules in the latest budget.

The other option, and the one we went for with Rittman Mead Consulting, is to become a consultant, with a number of clients, more project-based work, shorter assignments (typically a week or two) and more of a variety of work. The upside of this mode of work is that you get exposed to lots of clients and technologies, you get the ability to do R&D in the spare time (although of course you can't charge for this), tax-wise there's no problem with IR35 and it's (in my opinion) a lot more fun. Charging-wise, as a contractor you normally go out for between £300 and £500 a day in the sort of area we work in, whilst as a consultant, you normally charge double this - because half the time you're not billing, and justified on the basis that the R&D you do, plus the exposure to cutting-edge clients and projects, means you're a premium product available at short notice - good if you can maintain the required standard, you're prepared to put the research work often inevitably in your own time, and can hold your nerves when the bookings go quiet, but obviously not to everyone's taste. For us though, where our main proposition is to be the best, most technically competent and experienced Oracle BI&W consultants on the market, available to drop in to projects at short notice and get things working properly, it was the obvious way to go.

UPDATE:Reading the above again, what I was trying to say didn't really come out right. Whether you're mercenary or looking out for the client, whether you're a knowledgeable developer/DBA or a beginner, is nothing to do with whether you're a contractor or a consultant - it's more down to your own personal approach to work. I've worked in the industry for a few years now and I've seen good and bad approaches from both contractors and consulting companies, so you can't generalize. The real distinction was between working for the same customer all the time vs. having a mix of customers, and trying to build a business vs. taking the profits as salary, the bit about quality of work and philosophy towards customers was not relevant - apologies for any contractors unfairly slighted there - Mark.

For us, both Jon and I have young families and like most people in our situations and age groups, we haven't got a lot of money sitting around to invest in the company. In the end, we've managed to get things started just using credit cards and mortgage reserve accounts, and we deliberately didn't take any funding at the start or long-term loans as, to be honest, consulting should be a cash-generating business that doesn't need a lot of upfront investment - you don't need to buy a factory, or a shop, or employ salespeople, at least not at the start. In terms of an office, at the moment we're based out of a home office at my house, with someone working part-time doing our accounts and admin, but within the next twelve or eighteen months we'll probably get some office space and start taking on our first employees. Again, keeping on top of costs is the main thing - and as we've set up a proper company, with long-term clients and a three to five year business plan, there are some investments you're going to have to make.

One of these is signing up with the Oracle Partner Network. The Oracle Partner Network is sort of your "passport" to doing business within the Oracle ecosystem, and membership comes in three levels; Member Partner, which basically amounts to paying Oracle £1000, putting a logo on your website, getting a Partner Manager assigned to you and getting your name known within the Oracle organization; Certified Partner, and then Certified Advantage Partner, which are more based on license sales, together with numbers of OCPs and other quality qualification criteria. We're just starting off though, but for us, our model is very much to work alongside Oracle and other partners to help customers get the most out of Oracle business intelligence products, so signing up, and participating in the partner system, made a lot of sense to us, and we've got a lot of good friends and people we already work within the Oracle BI product management, consulting and development teams in the UK and United States.

Apart from the partner fee, you get the usual costs in setting up a company. Establishing the company itself was surprisingly easy, costing about £125 and with all the paperwork being carried out online. Along with the company formation (done through SJD Accountancy) came a bank account (with Cater Allen), which is free when we're in credit, and the accounting costs come to around £125 per month. Other than that, there's the cost of professional indemnity insurance for all the company (£1m of cover for around £85/month), mobiles and broadband, and of course, you've got to cover your wages, and expenses incurred, for around three months until the invoices get paid, which means you need about £10-£15k of seed capital each to make it work.

In terms of the economics, we're run as a limited company which means we have to file accounts once a year, pay corporation tax at 22% of our profits, and we're registered on the VAT flat-rate scheme which means we charge VAT at 17.5% (where applicable), can't claim back VAT on purchases, but only pay it at 12.5% (on all sales, even when not VAT-applicable) with a further 1% discount in the first year. When you're doing most of your work in the UK or Europe, and not making huge VAT-eligable purchases, it's a good scheme as you actually make a small profit - 5 or 6% on sales - on the difference between what you charge and what you pay to the Inland Revenue. Handling all the tax side is complicated though, even when you employ accountants to do the work for you - the one we use, SJD Accounting, prepare your tax return and handle the payroll, but it's still down to you to understand the rules as these sorts of schemes don't really offer advice. In fact the best advice I ever had on this was from my old boss - whatever you do, however bad the situation - always make sure you pay the VAT..... wise words indeed.

Infrastructure-wise, we've got for Apple Macs as our developer platform with Oracle running in Parallels virtual machines. Our admin team runs on Macs as well, so we do all our file-sharing using .Mac, and run all the main company applications (timesheets, email, calendaring and so on using software-as-a-service: Freshbooks for the timesheets, Google Calendar, sync'ed to iCal using Spanning Sync, Wordpress (self-hosted) for the website and Hostroute for our hosting and email. Even facilities such as conference calling are relatively easy to set up with pay-on-demand services based on 0870 numbers easy to set up, although we've not gone for one of those call answering services - we want to take all calls at this stage ourselves, as most people who want to work with us know us already professionally, and we want to keep the personal contact, given that much of the appeal of the company is Jon and mine's personal involvement in every project and client.

In terms of how the business is going, I have to say, it's going really well. So far I've been mostly on my own, as Jon doesn't officially join until next Monday (16th April), but we've kept in touch all of the time and made all the big decisions together. Business is, in fact, booming, and we've started working with some pretty impressive customers in the UK, Europe and the USA, for both consulting and training. Oracle Warehouse Builder is by far the most popular area we're working in, in particular custom, on-site training, and development and consulting assistance for customers who have developed their project and now want to go in to production. Apart from the OWB work, we've done work with Oracle Data Integrator, Oracle BI Suite Enterprise Edition and a project to gather business requirements for an enterprise business intelligence project, and the only downside so far is that it's been hard work and long hours although a lot of fun - and it's always difference when you're working for yourself. We've struck up some good relationships with other Oracle partners in our space - people like Miracle Iceland and Scotland, Rocela, SolStonePlus and Connect, and the customers we've worked with have been on-board with the company formation and have been keen to work with as we start things up. We're grateful to all of them for their support and enthusiasm.

One of the hardest things has been around time management, and making sure you manage to both give the customers excellent service, and run the business, which at the start is a pretty intensive process. So far, because of the profile Jon and I have got, the contacts we've got in the industry and the user community, and through relationships we've got with other Oracle partners - the sales process has been pretty quick and straightforward, and we've not had to take time out from customer work to go to sales meetings and write lengthy proposals. Our proposition is pretty clear and straightforward - experienced Oracle BI&W consultants and developers with lots of project experience and a good understanding of the business issues - and so, so far customers have sought us out rather than us having to do lots of cold-calling or going through agencies. Given the model we've chosen, though - going for short-term work - I'm under no illusion that at some point, we'll need to get on the phone and let people know we're around, which will be one of the hardest things to do as we're not naturally sales people.

Anyway, I thought one or two people might be interested in how we've got on. Any comments, agreements or disagreements, let me know in the comments.